According to property consultant firm ANAROCK, about 5.76 lakh units, launched in 2013 or before across budget segments, are stuck in various stages of non-completion in the top seven Indian cities

this holds out hopes to lakhs of homebuyers stuck in unfinished real estate projects for many years

A distress fund approved for unfinished residential real estate projects has taken off. Although just four projects have been cleared to receive the funding right now, this holds out hopes to lakhs of homebuyers stuck for many years - according to property consultant firm ANAROCK, about 5.76 lakh units, launched in 2013 or before across budget segments, are stuck in various stages of non-completion in the top seven Indian cities.

While developers too get a relief, the fund does come at a cost - far higher interest than what they expected.

Niranjan Hiranandani, Managing Director of Hiranandani Group and National President of industry body NAREDCO on Wednesday said that distress fund has received well over 100 applications thus far, of which four have been cleared recently. The four projects could receive funding in the range of Rs 25 crore each.

The Union Cabinet, in November last year, approved the establishment of the fund to help developers complete unfinished residential real estate projects. The 'Special Window' fund provides priority debt financing particularly for middle-income housing. The government had stated that it would act as the sponsor and the total commitment to be infused would be up to Rs 10,000 crore. The fund will also bag investments from institutions such as LIC and SBI, which will expand the corpus to Rs 25,000 crore.

The fund is set up as a Category-11 AIF (Alternate Investment Fund) debt fund registered with the market regulator Sebi; SBICAP Ventures Limited is the Investment Manager.

"Each project has to be minimum of 60 per cent complete. The balance will be funded," Hiranandani said and added that the fund will operate in a 'Last In First Out' or LIFO manner. The distress fund is last mile funding and even if no one makes money from a project, the fund is entitled to.

The fund is expected to charge an interest rate of 15 per cent - far higher than what developers initially hoped for. When cleared by the Cabinet, developers expected the fund to attract an interest between 7 and 9 per cent.

Hiranandani said developers shouldn't complain even when the interest rate seems to be high - projects under the National Company Law Tribunal (NCLT) have very few options left - such projects have no way to raise money. The distress fund can now fund construction activity of apartments not higher than Rs 2 crore in value.